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Smithfield to Cut Hog-Feed Additive to Boost China Exports

Oct. 10 (Bloomberg) -- Smithfield Foods Inc., the world’s largest hog producer, said it will reduce the use of a feed additive that makes pork leaner as it seeks to win more business in China.

The U.S. company, acquired by Hong Kong-based Shuanghui International Holdings Ltd. in a $4.7 billion deal last month, has the capacity to ship “large quantities” of ractopamine-free pork to China, Chief Executive Officer C. Larry Pope said in an interview yesterday in Hong Kong. China bans the use of the additive.

Smithfield’s takeover by Shuanghui, the largest Chinese purchase of a U.S. company, will help boost China’s import of pork, which may climb to 1.39 million metric tons, according to the U.S. Meat Export Federation. Shuanghui will promote Smithfield products and brands to Chinese consumers, Shuanghui Chairman Wan Long said in the same interview.

“Our top priority now is to expand the trading of Smithfield and to expand the export market,” Wan said today at a press conference in Hong Kong. “There’s a huge potential for the export of U.S. pork to outside of the United States.”

Shuanghui will keep Smithfield’s brand and management unchanged, and there won’t be any factory closures, Wan said.

Hog futures for December settlement on the Chicago Mercantile Exchange were little changed at 86.425 cents a pound at 2:10 p.m. in Hong Kong.

Increased Demand

The purchase drew criticism from some U.S. lawmakers who raised concerns that it may transfer food-safety issues from China to the U.S. The bid for Smithfield underscores the increased demand for meat, particularly pork, from China’s expanding middle class.

About 40 percent of Smithfield’s production is ractopamine-free, Pope said. “We have the ability to expand that,” he said.

While Smithfield’s exports to China have been mostly offal, parts shunned by U.S. consumers, the company will boost exports of higher-priced cuts of meat, Pope said. ‘

“The merger’s objective is to go beyond the offal into the muscle meat,” he said, adding that the company has been selling prime cuts to Shuanghui for nearly a year.

Wan also said the company had no specific plans for a stock exchange listing. Shuanghui International has a listed unit in Shenzhen called Henan Shuanghui Investment & Development Co.

“There’s tremendous work” to be done after the merger, Wan said today. “An IPO is a good thing and we hope to get listed, but it needs to wait until the opportunity is right.”

To contact the reporter on this story: William Bi in Beijing at wbi@bloomberg.net

To contact the editor responsible for this story: Brett Miller at bmiller30@bloomberg.net

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